The Merced City Council decided unanimously Monday against putting a measure to increase the city’s transient occupancy tax before voters in November.
The council opted instead to support an alternate tax proposal forwarded by hotel owners. The vote was 5-0, with councilmembers Fue Xiong and Jesse Ornelas absent from the meeting.
Transient occupancy taxes (TOT) are a form of revenue for local governments from taxes charged to hotel guests. Merced’s current transient occupancy tax adds a 10% charge to the bill of hotel guests.
The City Council had been prepared Monday evening to review a proposed ballot measure that would increase the city’s transient occupancy tax to 12%. Two percent of that would support the creation of a Tourism Business Improvement District (TBID) to promote Merced as a destination.
The alternative plan by the Merced Hotel and Lodging Association has proposed rather than raise the transient occupancy tax, a higher rate would be charged to hotels once the TBID is established.
Deputy City Manager Frank Quintero said Merced hotel owners would take their own vote on the TBID. Those owners would in-turn impose an agreed upon additional tax on themselves rather than the revenue come from a TOT increase.
The TBID would be similar to the Property Based Business Improvement District which benefits downtown Merced. Under the PBID, business owners agree to tax themselves and those funds are collected by the city’s finance department. The additional property tax ultimately goes to the PBID governing board, Quintero explained.
Mayor Matt Serratto and the rest of the council agreed the Merced Hotel and Lodging Association’s proposal was preferrable to increasing the transient occupancy tax rate.
The mayor added if the hotel owners do not take their own vote on the TBID in the upcoming months, the city should recosider pursuing a TOT increase for the 2026 ballot.
Councilmember Shane Smith said the city doesn’t yet have an “articulable” reason to sell voters on a TOT increase for the November ballot.
“We should pause here and allow staff and the Hotel and Lodging Association to do their hard work, with an expectation (that in) December, January we’re having this discussion again,” Smith said.
Quintero said the city should have a timetable by the Aug. 5 meeting for the TBID.
Not far from Merced, last month the Turlock City Council voted to put an increased transient occupancy tax on their November ballot.
Turlock’s transient occupancy tax is set at 9 percent and voters will decide on rate not to exceed 14%, The Turlock Journal reported.
If passed, the measure would allow current and future city leaders to increase or decrease the rate by passing a resolution. Increasing the rate higher than 14% would require voter approval.